Increase dividends and cultivate high quality
Net profit, operating income, and PPOP in '23 were +6.2%, -1.6%, and -2.1%, respectively. The growth rates were -0.3 pct, +0.1 pct, and +0.5 pct compared to the previous three quarters. It is proposed to pay a dividend of $1.97 per share in '23. The annual cash dividend ratio is 35% (2022:33%), and the dividend rate is 6.29% (2024/3/25), increasing the dividend rate. In view of the slowdown in scale expansion, we forecast an EPS of 5.91/6.15/6.54 yuan for 24-26, a BVPS forecast of 40.85 yuan for 24-26, and 0.77/0.68 times PB for A/H shares. In the past 5 years (up to 3.25), the average PB (MRQ) of the company's A/H shares was 1.47/1.45 times. The retail strategy had a moat effect, and investment returns increased. However, due to interest pressure, A/H shares were given a 24-year target PB of 1.00/0.85 times, and the target price for A/H shares was 40.85 yuan/37.57 HKD, maintaining the A/H share buy/increase rating.
Credit structure improved, deposit costs stabilized
The year-on-year growth rates of total assets, total loans, and total deposits at the end of 2023 were +8.8%, +7.6%, respectively. Compared with -1.1 pct, -0.2 pct, and -4.3 pct at the end of September, the rate of table expansion was slower. The credit structure has improved, and the size of notes has shrunk. Retail loans and loans to public loans at the end of 23 accounted for +0.3 pct and +0.5 pct in total loans at the end of September, respectively, to 52.8% and 39.9%, respectively. The deposit balance ratio at the end of 23 was -0.6pct to 54.9% compared to the end of September.
Net interest spreads for 23 years were -4 bps compared to the previous three quarters, and net interest spreads for the Q4 single quarter decreased by 7 bps to 2.04% from Q3.
The yield on Q4 interest-bearing assets and loans declined by 4 bps and 16 bps from Q3. The Q4 interest-bearing debt and deposit cost ratio increased by 2 bps and remained flat compared to Q3, and the growth rate of personal demand deposits was -13.6 pct compared to the previous three quarters.
Investment income has increased, and income has recovered
Non-interest income in 2023 was -1.7% YoY, up 2.9 pct from 23Q1-3. The year-on-year revenue in 2023 was -10.8%, and the growth rate was +0.7pct compared to the previous three quarters, mainly due to asset management and settlement fee revenue growth of +0.3pct/+0.8pct compared to the previous three quarters. Wealth management revenue was -7.9% year-on-year. The growth rate was -1.9 pct compared to the previous three quarters, agent insurance income was +9.3% year-on-year, and the growth rate was -7.6 pct compared to the previous three quarters, mainly affected by fee cuts in banking insurance channels. Agency fund/financial management/trust income was -21.5%/-18.4%/-19.4%, respectively. Retail/Golden Sunflower AUM at the end of '23 was +9.9%/+9.7% YoY, +0.5pct/+0.4pct compared to the end of September. Other non-interest income in 2023 was +25.0% year-on-year, and the growth rate was 10.1pct higher than Q1-3, mainly benefiting from increased income from bond investment and increased income from foreign currency transactions.
Asset quality is improving, and credit costs are declining
The non-performing loan ratio and provision coverage ratio at the end of 23 were 0.95% and 438%, respectively. Compared with -1 bp and -8 pct at the end of September, the non-performing rate was stable, moderate and positive. The Group's non-performing ratio between public and retail sales was -8 bps and +5 bps to 1.19% and 0.89%, respectively, at the end of June. The quality of retail loan assets fluctuated, and the quality of public loan assets improved. The non-performing rates for mortgages, credit cards, and small and micro loans were +2bp, +7bp, and +5bp at the end of 23H1, respectively. The Group's non-performing rate on public real estate was -26 bps to 5.26% at the end of June. The parent company's bad generation rate in '23 was the same as in Q3 at 1.03%; annualized credit costs were -0.07pct to 0.72% year over year.
Risk warning: Economic recovery fell short of expectations, and the deterioration in asset quality exceeded expectations.